April 2, 2020 Legal Update
Regulations Released April 1 Provide More Guidance on the Families First Coronavirus Response Act
On Wednesday, the Department of Labor released new regulations that clarify the paid family and sick leave provisions of the Families First Coronavirus Response Act. The regulations clarify inconsistencies between certain provisions, explain how different paid leave provisions interact, outline how pay must be calculated, and act on the Department’s statutory authority to grant an exception to small businesses. Below are important highlights from the regulations to help employers navigate this expansion of paid leave, which officially went into effect on April 1.
Children over 18: Paid leave is available for employees who must care for children whose school or child care provider is unavailable due to COVID-19 related concerns. This provision is to be interpreted consistently with the FMLA, which expressly includes children 18 years of age or older who are incapable of self-care because of a mental or physical disability.
Caring for other individuals: Paid leave is also available to care for individuals under quarantine or self-isolation due to concerns related to COVID-19. Employees are entitled to paid leave to care for someone with whom they have a personal relationship, such as an immediate family member, roommate, or a similar person with whom the employee has a relationship that creates an expectation of care.
Availability of Work, Teleworking, and Intermittent Leave
Availability of work: The availability of paid leave is limited to circumstances where the employee would be able to work or telework “but for” being the qualifying reason. Accordingly, employees are not entitled to paid sick leave when the employer does not have work for them. Thus, if a business closes due to a downturn in business or a stay at home order, the business’ employees would not be entitled to paid leave because their inability to work would not be due to a qualifying reason, but due to the closure of their place of employment.
Flexible telework arrangements: The Department encourages flexible telework arrangements that will allow employees to perform work remotely, even at unconventional times, while also performing personal obligations. Accordingly, while Department guidelines generally provide that all time between performance of the first and last principal activities is compensable work time, employers allowing flexible telework schedules during the COVID-19 pandemic will not be subject to the continuous workday rule.
Intermittent leave: Eligible employees may take their paid sick leave or expanded family and medical leave intermittently with the employer’s agreement. For employees who are directed to telework, they may take intermittent paid in any agreed increment of time for any qualifying reason. However, for employees directed to report to a worksite, paid intermittent leave may be taken solely to care for children.
Part-time employees with varying weekly schedules: Under the paid sick leave provisions of the law, full-time employees are entitled to 80 hours of paid sick leave while part-time employees are entitled to the “number of hours that such employee works, on average, over a 2-week period.” Thus, part-time employees with varying weekly schedules are entitled to paid sick leave for a number of hours equal to fourteen times the number of hours that the employee was scheduled per day, averaged over the past six-month period. Employers may also use twice the number of hours that an employee was scheduled to work per workweek, averaged over the six-month period.
Regular rate of pay: For both expanded family leave and paid sick leave, the required compensation references the employee’s regular rate. The regulations clarify that this must be computed on a workweek to workweek basis, requiring employers to use an average of the employee’s regular rate over multiple workweeks.
Unused leave: Employers have no obligation to provide financial compensation or other reimbursement for unused paid sick leave or unused expanded family and medical leave.
Interaction Between Different Leave Benefits
Substituting paid sick leave for unpaid family leave: Generally, the paid sick leave and expanded family and medical leave are designed to work in tandem to provide continuous income for employees to care for children whose school or child care provider is unavailable due to COVID-19 related reasons. Accordingly, the regulations clarify that the unpaid period for expanded family and medical leave lasts for 2 weeks, rather than 10 days, so the initial 2 week unpaid period for expanded family and medical leave can be substituted with 2 weeks of paid sick leave.
Prior FMLA leave reduces paid leave available: When employees have already taken some FMLA leave in the current twelve-month leave year, the maximum twelve weeks of expanded family and medical leave can be reduced by the amount of the FMLA leave taken in that year.
80 hour limit: 80 hours is an absolute limit for paid sick leave to which individual employees can potentially be eligible, calculated per person and not per job. Once an employee takes the maximum 80 hours of paid sick leave, he or she is not entitled to any additional leave from a subsequent employer or in a new position.
Covered Employers and the Small Business Exemption
Timing of determination: Eligibility of the employer is to be determined at the time an employee would take the requested leave. Thus, employers with 500 or more employees at the time the employee’s need to take leave arises would not be required to provide paid leave.
Small business exemption: Small private employers with fewer than 50 employees do not have to provide employees with paid sick leave and expanded family and medical leave to care for children whose school or child care provider is unavailable when such leave would jeopardize the viability of the business as a going concern. The regulations explain that such employers are exempt when:
- such leave would cause the small employer’s expenses and financial obligations to exceed available business revenue and cause the small employer to cease operating at a minimal capacity;
- the absence of the employee or employees requesting such leave would pose a substantial risk to the financial health or operational capacity of the small employer because of their specialized skills, knowledge of the business, or responsibilities; or
- the small employer cannot find enough other workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services the employee or employees requesting leave provide, and these labor or services are needed for the small employer to operate at a minimal capacity.
Note that these exemptions are applicable only to employees whose absence would harm the employer business, not to all employees of the business generally.
Notice and Documentation
Notice of leave: Employers may not require advance notice of leave, but may require employees to follow reasonable notice procedures after the first workday during which leave is taken. If leave to take care of children whose school or child care provider is unavailable due to COVID-19 related concerns is foreseeable, employees must provide notice of such leave as soon as practicable. If employees fail to give proper notice, employers are advised to give employees notice of the failure and an opportunity to provide the required documentation prior to denying the request for leave.
Documentation requirement: Employees must provide documentation in support of paid sick leave or expanded family and medical leave. Such documentation must include a signed statement containing the employee’s name, the date(s) for which leave is requested, the qualifying reason for leave, and a statement representing that the employee is unable to work or telework because of the qualifying reason.
Employees must also provide additional documentation depending on the COVID-19 related qualifying reason for leave, such as (1) the name of the government entity that issued the quarantine or isolation order; (2) the name of the health care provider who advised the employee or the individual being cared for to self-quarantine; or (3) the name of the child being cared for, the name of the school or child care provider that closed or became unavailable; and a statement representing that no other suitable person is available to care for the child.
Document retention: Employers must retain all documentation provided in relation to requested sick leave for four years, regardless of whether leave was granted or denied. If employers deny requested leave pursuant to the small business exemption, they must document its authorized officer’s determination that the criteria for that exemption are satisfied and retain documentation for four years.
IRS Form for Claiming Tax Credits
The FFCRA established tax credits against the employer’s social security tax obligations to offset the cost of paid leave. Employers will be allowed the full amount of this refundable credit even if it exceeds their employment tax liability. If quarterly employment tax deposits that are otherwise required are less than the amount of credit for which the employer is eligible, employers may receive the remaining credit in advance, using IRS Form 7200.
March 26, 2020 Legal Update
New Guidance on the Families First Act
This week the Department of Labor published new guidance on employer obligations under the recently-enacted Families First Coronavirus Response Act. The Department has clarified that the Act takes effect on Wednesday, April 1. As of that date, employers with fewer than 500 employees must provide eligible employees emergency paid sick leave for up to 80 hours and, if needed, additional paid leave for up to 10 weeks to care for a child whose school is closed or place of care is closed due to COVID-19. The Department said that until April 17 it will allow for some leniency on the timing of these payments. If employers cannot make the payments pursuant to the regular payroll schedule, employers should make them “as soon as practicable.” More details related to DOL’s guidance can be found here: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions.
The Department has published a poster advising employees of their rights under the Act. The poster, which can be found here https://www.dol.gov/agencies/whd/pandemic, must be posted wherever employees are likely to see it. If they are telecommuting, the poster should be e-mailed to them. It should be posted no later than April 1.
Additionally, the IRS has also issued further guidance interpreting the tax provisions of the Act. Employers who provide paid leave under the Act are entitled to a credit against Social Security and Medicare taxes due on quarterly payroll tax returns. To the extent there are insufficient payroll taxes to cover the cost of the leave, employers will be able to file a request for reimbursement. “The IRS expects to process these requests in two weeks or less.” Notably, the IRS has clarified that the tax credits available under the Act are designed to provide dollar for dollar reimbursement for the cost of providing paid leave, as well as the cost of continuing employer-provided insurance.
More details related to the IRS guidance can be found here: https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus
Businesses with 500 or more employees are exempt from the Act. Businesses with fewer than 50 employees may be exempt from the leave requirements relating to school and daycare closures, but only if the payments would jeopardize the ability of the business to maintain operations. To date, there is no clear guidance on this standard. Regulations on the subject are expected within the next few days.
March 19, 2020 Legal Update
Families First Coronavirus Response Act
On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act expanding existing Family and Medical Leave Act (FMLA) protections and creating a new federal paid sick leave program for employees impacted by the spread of COVID-19. The Act takes effect by April 1. Employers are advised to review their workplace policies now to determine how the new mandates will potentially affect their telecommuting and sick leave policies.
Expansion of FMLA
The Act significantly expands coverage and eligibility under the FMLA. Qualifying leave now includes employees unable to work or telework because they are caring for children whose school, place of care or childcare provider has closed or is unavailable due to a public health emergency related to COVID-19. This emergency expansion of FMLA will remain in effect until December 31, 2020.
Covered employees include all employees who have been employed for at least 30 days before the first day of leave. Covered employers include employers that employ fewer than 500 employees. While the Act provides for the possibility of regulations that may exempt small businesses with fewer than 50 employers who may be negatively impacted by the requirements, there are no such regulations currently in effect.
Under the Act, employees are entitled to up to 12 weeks of leave, the first 10 days of which may be unpaid. Paid leave must then be provided based upon the employee’s regular rate of pay and normally scheduled hours. Employees are generally entitled to 2/3 of regular wages, although pay cannot exceed $200 per day and $10,000 in the aggregate.
Emergency Paid Sick Leave
The Act also establishes a new, temporary paid sick leave program effective until December 31 and limited to COVID-19 related concerns. Employees are entitled to paid leave in the following circumstances:
- Employees subject to quarantine or isolation orders by the government.
- Employees advised to self-quarantine by health care providers.
- Employees experiencing symptoms and seeking a diagnosis.
- Employees caring for an individual subject to quarantine or isolation orders by the government or advised to self-quarantine by health care providers.
- Employees caring for children whose school, place of care or childcare provider has closed or is otherwise unavailable due to COVID-19 precautions.
- Employees experiencing any other substantially similar conditions specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
All employees are covered by the paid sick leave provisions regardless of how long the employee has been employed by the employer. Covered employers include businesses and individuals that employ fewer than 500 employees and public agencies that employ at least 1 employee.
Sick leave pay is to be calculated based on the employee’s required compensation (the greater of the applicable minimum wage or the employee’s regular rate of pay) and the number of hours the employee is normally scheduled to work. Full-time employees are entitled to up to 80 hours of paid sick time. Part-time employees are entitled to pay for hours equivalent to the number of hours that the employee generally works over a 2-week period. However, compensation is limited to a 2/3 rate for employees taking leave to care for another individual, employees taking leave to care for a child whose school or place of care has closed, and employees taking leave related to another substantially similar condition.
Generally, sick leave pay is capped at $511 per day and $5,110 in the aggregate if leave is taken to comply with a government quarantine or isolation order to comply with health care provider advice or to seek a diagnosis. Pay is capped at $200 per day and $2,000 in the aggregate if leave is to care for another individual, to care for a child whose school or place of care has closed or related to another substantially similar condition.
While an eligible employee may elect to use other paid sick leave benefits prior to taking advantage of this benefit, an employer cannot require an employee to use them.
Note that while small employers may be exempt from both these new mandates if their operations do not “affect commerce,” this is a very narrow exemption that will not apply to most businesses.
Tax Credits to Offset Cost to Employers
Recognizing that the Act’s paid leave mandates will create unmanageable costs for many employers, Congress also authorized a refundable tax credit program to offset costs related to paid leave. Employers will be entitled to a 100% credit against certain payroll taxes for paid leave wages capped at $511 per day or $200 per day if leave is taken to care for an individual, child whose school or place of care has closed, or for leave related to a similar condition for up to 10 days per employee. Furthermore, employers will be entitled to 100% credit for family leave wages capped at $200 per day and $10,000 in the aggregate per employee.
- Explore telework options – The paid leave and FMLA expansion only applies to employees who are unable to work or telework due to COVID-19 related concerns. Employers may avoid the need for paid leave and accommodate such family emergencies by providing employees with the option to work remotely.
- Provide notice – Employers must post a notice of the expanded family leave rights in the workplace. The Secretary of Labor must provide a compliant, model notice that employers may use by March 25, 2020.
- Employers have no later than 15 days after the March 18, 2020 enactment of the Act to comply with its mandates. These mandates will remain in effect until December 31, 2020.
- Continue existing leave policies – This Act does not override or preempt state law regarding paid leave or existing policies implemented by the employer. Employers must continue to comply with all existing applicable leave laws and policies.
- Exceptions – Employers of health care providers and emergency responders may elect to exclude those employees from the benefits of these programs.
- Hope for small businesses – Be on the lookout for Department of Labor regulations exempting small businesses from the requirements of the expanded FMLA paid leave.